Warren Buffett has provided many pearls of wisdom and one of our favourites is the reminder to “be fearful when others are greedy and greedy when others are fearful”. It is a contrarian viewpoint and just makes good sense. So often we see investors caught up in the hype and buying high (along with the crowd) and selling low (out of a fear of further price declines).

Markets move through classic cycles from trough (maximum pessimism) to peak (maximum euphoria) and it takes a recognition of this and discipline to do the opposite of the crowd. When viable industries are simply out of favor, this is fertile ground to begin our research.

From the perspective of companies, it is not uncommon for them to cut costs and turn their attention to balance sheets when times are tough. This increased focus on the things that are necessary to allow them to survive a downturn ultimately puts them in a stronger position when things turn. Which brings us back to “buy low and sell high”.